IT outsourcing services: navigating the field with its promising benefits and potential drawbacks

There is a stark difference between outsourcing and one-time orders of particular services. Say, you asked a friend to replace a designer for a day for one-time pay. This just counts as a temporary replacement. But if you have reached an agreement with a design bureau and fully entrusted it with the performance of a number of functions – then it is in fact outsourcing.

Properly utilizing IT outsourcing services as a resource has always been beneficial to companies big and small alike, but in the past couple of years it has become far more important. Restrictions imposed due to COVID-19 have become a major factor in terms of business practices and structure. Remote work is now a prevalent method of employment, especially in the IT-industry. IT outsourcing services go hand-in-hand with remote and part-time hiring, allowing to establish the working process with multiple companies and contractors involved, no centralized office space required.

Since IT-products development necessarily involves, firstly, cooperation between different specialists with far-ranging skillsets and, secondly, proper hardware and infrastructure, IT outsourcing services are not just a convenient tool, but a must for any company apart from tech giants. In most cases a smaller firm simply does not have the resources, including intellectual ones, to create any meaningfully complex project by itself. That is why they have to rely on IT outsourcing services in many instances.

Having established that IT outsourcing services are a vital part in today’s IT-industry, let us examine its main potential benefits and risks. To better understand how indispensable IT outsourcing services are and how they augment the business, we may first look at their main advantages compared to maintaining an internal IT department.

Financial benefits of IT outsourcing services are most evident. These include but are not limited to the following:

• The contract is drawn up for a long period with a clearly defined amount of payments, which allows to plan the company's budget better.
• Payments are made based on job performed.
• There is no need to spend company funds on employee payroll taxes, no additional expenses on vacations, sick days, etc.
• There are no costs for organizing workplaces for employees and no additional rental costs.
• Quick problem solving by qualified specialists who are supposed to ensure mostly uninterrupted operation even in critical cases.
• Full control over expenses and the prompt delivery of the services.

Another kind of benefits are timing advantages that can be achieved using IT outsourcing services:

• Thanks to an experienced team and practiced actions, higher rate of work is achieved.
• The automated application acceptance system ensures the shortest possible response time.
• The HR department does not need to run as many recruitment campaigns that are time consuming.
• There is no need to waste time on monitoring and organizing the work of the department.
• There is no time loss in case of illness or vacation of employees.
• No problems with the dismissal of key employees of the department and the need for retention, search for new ones and training.
• Reducing the time to find the right solution in complex, non-standard situations due to the availability of advanced techniques.
• Automatic accounting of work and generation of reports for certain periods of time may be implemented.
• Providing an IT outsourcer with a clear infrastructure development plan and methods of interaction.

Although the benefits of utilizing IT outsourcing services listed above are numerous, some disadvantages related to it are also present. It is extremely important to consider both pros and cons of IT outsourcing services in order to choose the right outsourcing development company. You should consider their specialization, such as mobile app development outsourcing. In order to get a good deal, one must think about the following potential disadvantages and risks related to IT outsourcing services.

Handing over the company's various processes to a large number of participants can cause confusion, and towards the end of the project it turns out that some of the work was not completed, because each contractor thought it was a “foreign” task. Potentially, this could lead to an increase in the cost of the project.

A lot of preparatory work, including the creation of the most detailed technical or at least functional task, as well as a complex financial assessment of the effectiveness of the solution, while investment in knowledge transfer, risks from changing the working model must be taken into account. However, this stage is inevitable in the case of in-house development.

Potential risk of leaking inside information. Unfortunately, in the IT world there are a number of stories in which the customer company cannot receive the source code of its projects from the outsourcer. Such stories are most often associated with non-fulfillment of obligations by the customer company: payment evasion, suspension of project financing, etc. In all other cases, the source code is transferred without fail.

Difficulties in finding a counterparty, at least for the first time, especially in an area where the customer is not a specialist. To make life easier for both ourselves and the contractor, one should attract and accumulate the maximum amount of resources during the preparation phase to immerse ourselves in the project. Even before signing the contract, colleagues clearly understand what they will work with.

Theoretically, outsourcing as a business model can increase cyber-security risks if controls do not keep up with technology changes, this can be fraught with data leakage, for example. However, the use of the latest developments in the field of online financial services helps to facilitate the effective management and control of cyber threats.

Overall, the possible disadvantages of IT outsourcing services can be mitigated by both choosing the correct approach to ameliorate their effects and picking the right company for outsourcing. A legitimate company must possess a representative portfolio and receive positive independent reviews. Try and check using reviews and interviews whether the company meets your expectations regarding the pros and cons mentioned in this article – and you will have the best possible approximation of the objective characterization of the company in question.